Sonata warning signs surface
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Sonata warning signs surface
Hyundai: We're watching fleet sales, incentives
Mark Rechtin | | Automotive News / March 27, 2006 - 6:00 am
![](http://www.edmunds.com/media/roadtests/firstdrive/2006/hyundai.sonata/06.hyundai.sonata.act.500.jpg)
Hyundai: We're watching fleet sales, incentives
Mark Rechtin | | Automotive News / March 27, 2006 - 6:00 am
![](http://www.edmunds.com/media/roadtests/firstdrive/2006/hyundai.sonata/06.hyundai.sonata.act.500.jpg)
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The Sonata scramble The Sonata takes more days to turn than average … Sonata Entry-mid-sized segment Sept. ’05 41 34 Jan. ’06 71 52 Feb. ’06 74 63 … and its average cash rebates are high. Sonata Entry-mid-sized segment Sept. ’05 $1,496 $1,448 Jan. ’06 1,978 1,596 Feb. ’06 2,062 1,744 Source: Power Information Network
LOS ANGELES -- Last year, Hyundai Motor America touted the redesigned 2006 Sonata as capable of taking on the Toyota Camry and Honda Accord. Part of that was bringing its sales volume into the big leagues of 150,000 units a year.
Yes, the Sonata is reaching its sales targets this year. But how Hyundai is getting those Sonata sales suggests potential long-term trouble for the automaker's volume leader.
Hyundai is pouring vehicles into daily rental fleets. Retail incentives exceed the entry-mid-sized segment average, according to Power Information Network data. Worse yet, the Sonata takes more days to turn than the segment average. Its transaction prices are declining as well.
Hyundai's goal of increasing the redesigned Sonata's sales by nearly 50 percent over the previous design's total - in a shrinking segment, no less - is a daunting challenge, acknowledges John Krafcik, Hyundai's vice president of product development and strategic planning. In 2004, Hyundai sold 107,189 Sonatas.
Krafcik says the warning signs are being addressed, or can be readily explained.
Since Sonata's launch last summer, about 30 percent its sales have been to daily rental fleets, according to CNW Marketing Research of Bandon, Ore. That is on the cusp of being dangerously high because it risks diminishing the brand's reputation, says CNW President Art Spinella.
On the plus side, Hyundai is getting a "fairly decent" price for its fleet sales, Spinella says. "It's not a fire sale like Ford Taurus was at the end of its life."
For a brand that has low awareness among shoppers, fleet sales can be a necessary evil, says Krafcik. He says Sonata fleet sales are right at the mid-sized sedan segment average.
"We need to get butts in seats. Fleet is a way to do that."
Just as important is getting more retail consumers to buy the Sonata.
The Hyundai Challenge
Kevin Mize, dealer principal of Chicago's O'Hare Automotive Group (Hyundai-Honda-Pontiac), said retail sales are on the rise.
"Every launch comes out slow in sales, but Sonata is definitely getting some momentum," Mize says.
After a $100 million advertising launch for Sonata last year, Hyundai will crank up spending again this year. A campaign called The Hyundai Challenge will run against the 2007 Toyota Camry launch. The ads will tell shoppers that they shouldn't buy a Camry without first checking out the Sonata.
Hyundai dealers have been encouraged to have a Camry on-site for comparison purposes, especially in terms of sticker price. Hyundai claims comparably equipped Sonatas can cost $4,000 less than the 2007 Camry.
As for incentives, Hyundai has a $500 cash-back deal on the four-cylinder Sonata, and $1,000 on the V-6. It also has $1,000 cash for Hyundai owners, which accounts for about 30 percent of Sonata deals. There also is $1,000 for those who finance through Hyundai Motor Finance, about 60 percent of the deals.
More four-bangers
Data from the Power Information Network show Sonata transaction prices have declined since launch. In August, Hyundai's average transaction price was $19,805, but that has slid steadily to $18,868 in February. Krafcik says that is due to Hyundai's model mix leaning more toward four-cylinder engines.
The increased days to turn comes from Hyundai cranking up its Alabama manufacturing plant in anticipation of Job 1 of the Santa Fe sport wagon.
When the plant has to concentrate on starting Santa Fe production, Sonata output will decline. Krafcik said Hyundai was trying to get dealers enough inventory to carry them through the fallow months.
Hyundai also is restructuring its pricing and options packaging by pulling forward its 2007 model year release. The 2007 model, which will arrive in May or June, will give the four-cylinder model more standard features and a realigned pricing structure.
Yes, the Sonata is reaching its sales targets this year. But how Hyundai is getting those Sonata sales suggests potential long-term trouble for the automaker's volume leader.
Hyundai is pouring vehicles into daily rental fleets. Retail incentives exceed the entry-mid-sized segment average, according to Power Information Network data. Worse yet, the Sonata takes more days to turn than the segment average. Its transaction prices are declining as well.
Hyundai's goal of increasing the redesigned Sonata's sales by nearly 50 percent over the previous design's total - in a shrinking segment, no less - is a daunting challenge, acknowledges John Krafcik, Hyundai's vice president of product development and strategic planning. In 2004, Hyundai sold 107,189 Sonatas.
Krafcik says the warning signs are being addressed, or can be readily explained.
Since Sonata's launch last summer, about 30 percent its sales have been to daily rental fleets, according to CNW Marketing Research of Bandon, Ore. That is on the cusp of being dangerously high because it risks diminishing the brand's reputation, says CNW President Art Spinella.
On the plus side, Hyundai is getting a "fairly decent" price for its fleet sales, Spinella says. "It's not a fire sale like Ford Taurus was at the end of its life."
For a brand that has low awareness among shoppers, fleet sales can be a necessary evil, says Krafcik. He says Sonata fleet sales are right at the mid-sized sedan segment average.
"We need to get butts in seats. Fleet is a way to do that."
Just as important is getting more retail consumers to buy the Sonata.
The Hyundai Challenge
Kevin Mize, dealer principal of Chicago's O'Hare Automotive Group (Hyundai-Honda-Pontiac), said retail sales are on the rise.
"Every launch comes out slow in sales, but Sonata is definitely getting some momentum," Mize says.
After a $100 million advertising launch for Sonata last year, Hyundai will crank up spending again this year. A campaign called The Hyundai Challenge will run against the 2007 Toyota Camry launch. The ads will tell shoppers that they shouldn't buy a Camry without first checking out the Sonata.
Hyundai dealers have been encouraged to have a Camry on-site for comparison purposes, especially in terms of sticker price. Hyundai claims comparably equipped Sonatas can cost $4,000 less than the 2007 Camry.
As for incentives, Hyundai has a $500 cash-back deal on the four-cylinder Sonata, and $1,000 on the V-6. It also has $1,000 cash for Hyundai owners, which accounts for about 30 percent of Sonata deals. There also is $1,000 for those who finance through Hyundai Motor Finance, about 60 percent of the deals.
More four-bangers
Data from the Power Information Network show Sonata transaction prices have declined since launch. In August, Hyundai's average transaction price was $19,805, but that has slid steadily to $18,868 in February. Krafcik says that is due to Hyundai's model mix leaning more toward four-cylinder engines.
The increased days to turn comes from Hyundai cranking up its Alabama manufacturing plant in anticipation of Job 1 of the Santa Fe sport wagon.
When the plant has to concentrate on starting Santa Fe production, Sonata output will decline. Krafcik said Hyundai was trying to get dealers enough inventory to carry them through the fallow months.
Hyundai also is restructuring its pricing and options packaging by pulling forward its 2007 model year release. The 2007 model, which will arrive in May or June, will give the four-cylinder model more standard features and a realigned pricing structure.
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A campaign called The Hyundai Challenge will run against the 2007 Toyota Camry launch. The ads will tell shoppers that they shouldn't buy a Camry without first checking out the Sonata.
Hyundai dealers have been encouraged to have a Camry on-site for comparison purposes, especially in terms of sticker price. Hyundai claims comparably equipped Sonatas can cost $4,000 less than the 2007 Camry.
Hyundai dealers have been encouraged to have a Camry on-site for comparison purposes, especially in terms of sticker price. Hyundai claims comparably equipped Sonatas can cost $4,000 less than the 2007 Camry.
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Aren't Toyotas tariffed an extra $2-3k (already added in the sticker price) to make American cars more competitive in price? I read a while back that Toyotas' prices were increased to give it less of a price edge compared to domestic cars.
Is the government doing this also for Hyundais? Or should the prices increase for Hyundais, giving it less of a price edge compared to Toyota, just to even out the game?
Is the government doing this also for Hyundais? Or should the prices increase for Hyundais, giving it less of a price edge compared to Toyota, just to even out the game?
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Spinella, like many other auto marketers, is wrong. Rental-car fleets will NOT harm either the Sonata's or Hyundai's reputation. Look what happened to the Taurus reputation when Ford started selling them to rental firms en-masse...the car not only lasted some 20 years in the marketplace but played leapfrog year after year with the Camry and Accord as the country's best-selling car as well.
What WILL hurt the Sonata's reputation ( and I've posted and commented on this before ) is if the new Hyundai plant in Alabama cannot equal the newfound quality of Hyundai's Korean plants. This new plant is struggling with a brand-new building, brand-new machinery, a brand-new workforce, and a brand-new Sonata design for 2006......four major potential problem areas.
What WILL hurt the Sonata's reputation ( and I've posted and commented on this before ) is if the new Hyundai plant in Alabama cannot equal the newfound quality of Hyundai's Korean plants. This new plant is struggling with a brand-new building, brand-new machinery, a brand-new workforce, and a brand-new Sonata design for 2006......four major potential problem areas.
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Originally Posted by PhilipMSPT
Aren't Toyotas tariffed an extra $2-3k (already added in the sticker price) to make American cars more competitive in price? I read a while back that Toyotas' prices were increased to give it less of a price edge compared to domestic cars.
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Originally Posted by mmarshall
Spinella, like many other auto marketers, is wrong. Rental-car fleets will NOT harm either the Sonata's or Hyundai's reputation. Look what happened to the Taurus reputation when Ford started selling them to rental firms en-masse...the car not only lasted some 20 years in the marketplace but played leapfrog year after year with the Camry and Accord as the country's best-selling car as well.
What WILL hurt the Sonata's reputation ( and I've posted and commented on this before ) is if the new Hyundai plant in Alabama cannot equal the newfound quality of Hyundai's Korean plants. This new plant is struggling with a brand-new building, brand-new machinery, a brand-new workforce, and a brand-new Sonata design for 2006......four major potential problem areas.
What WILL hurt the Sonata's reputation ( and I've posted and commented on this before ) is if the new Hyundai plant in Alabama cannot equal the newfound quality of Hyundai's Korean plants. This new plant is struggling with a brand-new building, brand-new machinery, a brand-new workforce, and a brand-new Sonata design for 2006......four major potential problem areas.
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Originally Posted by bitkahuna
Huh? Camry's are built in the U.S. ![Uhh...](https://www.clublexus.com/forums/images/smilies/1387914497.gif)
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I think he was refering to when Toyota announced it's price increase last year. I believe they did that in order to help GM out by raising prices. It had nothing to do with tariffs.
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Originally Posted by spwolf
well, it will be bad for resale, when all these companies start unloading cheap 1yr sonatas. Fleet sales are necessary evil, nothing wrong with them as long as company is making money. What article points out is that they are giving larger than average incentives, which is bad.
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Originally Posted by Vegassc400
I think he was refering to when Toyota announced it's price increase last year. I believe they did that in order to help GM out by raising prices. It had nothing to do with tariffs.
If Toyota doesn't raise prices so much, they can be more competitive than Hyundai. However, I think Toyota should charge a little extra for extra profits for R&D and marketing. Toyota needs to find a balance between the two.
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Well Accord/Camrys/Altimas are rentals too, but it seems Hyundai is pushing their Sonata more to rental fleets, which in the long run, will hurt image.
Look at all the Infiniti rental jokes I make!
A friend of mines rented a QX56 from Enterprise recently. GO RENTALS!
Look at all the Infiniti rental jokes I make!
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